The Top 16 Reasons Why 90% of E-commerce Businesses Fail

E-commerce Failure Rate

So, you're thinking about starting a new e-commerce business, and you're nervous for many reasons. Sorry to say this, but you will make mistakes, and everything will not go your way. 

However, there is a way to minimize the number of errors you make so you don’t have a failed e-commerce company.

Here’s a fun (but sobering) fact: recent research shows that around 90% of new startups fail. A similar thing happens with e-commerce. Approximately 80%-90% of them fail, meaning the e-commerce success rate is less than 20%. If you’re starting your own online business or already run one, that might send a shiver down your spine.

But fear not! While you can learn a lot from a successful business, you can learn a lot more from failures. I’ve done some digging and highlighted the top 16 reasons why e-commerce businesses fail, so you can avoid those mistakes and get your business in that successful 10%.

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16 Reasons Why E-commerce Fail

1) Poor Product Content

You’ve got a great product, you’re proud of it, you’ve done your market research, and you know your stuff, but your product listing is a grainy photo with some poorly written copy. 

It looks like something on eBay or a dodgy Amazon vendor’s site, not a successful e-commerce business. You have to be mindful that the eyes of the world are on you — and there is no excuse for poor English (hello, Grammarly). Make sure you don’t make the wrong impression and devalue your brand because of a poor launch.

The first taste is with the eyes, that’s what my grandma always says. And she’s right! If your product image looks like something taken on a camera phone from 2005 by a ten-year-old, your customer won’t be impressed. Take the time to teach yourself how to take good product photos to dazzle your audience.

You shouldn’t just dazzle them with pictures, either. Your product description needs to describe your item clearly and be engaging enough to have it resonate with your audience. Use bullet points to list the benefits of your goods in a positive light, as Amazon has done for their Kindle Paperwhite:

Clear advantages to the customer are blended with product specifications, all in an easy-to-read format. Sometimes simplicity trumps complex, flowery language. Think about how your UI affects the customer experience.

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2) Too Much Friction

So, you want to buy this summer dress? Great! Just click Add To Basket. Now click on Checkout. Now choose your delivery option. Then enter your home address, your partner’s home address, your hopes and dreams, and a 1000-word essay on your family history.

Okay, so I’m exaggerating a little. But while it might seem obvious, many e-commerce businesses still neglect to make their checkout process as simple as possible — to their detriment. It has been described as the number one reason why consumers abandon their shopping carts before paying. 

Ensuring that your checkout procedure is as painless and straightforward as possible stops customers from dropping out of your marketing funnel at the last minute. It’s a simple change that is worth getting right.

You should also think about employing checkout trust signals. Consumers can be skeptical of brand-new websites and unknown brands, so partner with some well-known payment facilitators to reassure them. The number one goal is repeat business, capturing the data you need, giving customers a great experience, and letting them get on with their day.

3) Not Aligning Your Pricing and Ads

I saw a great deal on a blender the other day. But when I got to the checkout, I found out the postage and packaging were almost a third of the product cost itself! So I decided not to buy it. 

That meant no sale for the seller and no fruit smoothie for me in the morning. If I had known the full price, including P&P, I might have been more easily swayed.

You need to manage your customer’s expectations. Hidden fees are a significant contributor to cart abandonment. Ensuring that what your consumer sees is what they get is crucial, so don’t hide any unexpected costs until the last minute. There are lots of free or relatively cheap shipping calculator widgets out there, so be sure to include one in your store.

The same goes for misleading ads, you will undo all your hard work if you send the consumer to an offer or a landing page that isn’t aligned with the ad they clicked. Never play around with your customers’ trust like that — it won’t end well for you.

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4) Not Having a Clear Return Policy

No matter how successful your online business may be, there will be returns. Not having an understandable and accessible return policy will make your business look none credible. 

You can not expect anyone to buy from you or anyone else if they do not know the return policy or where to find it. Make sure to have it easily identifiable under each product on your site and have it emailed with their receipt if they choose to buy from you.

Having one will also help you if you are dealing with people who love buying items for a small amount of time, then send them back and trying to get a full refund. If you have identified with them where the return policy is and have it emailed to them if they try to return a product in a time window outside your policy, it will protect you if they resort to any legal action against you.

5) Poor Money Management

As well all know, before you even begin a business, no matter what the type, you must have money. You’ll need to have the right amount of cash flow to fund your business. You need it, or your company will cease to exist very quickly.

Be sure not to overspend in any phase of your e-commerce business, from marketing to how much software is needed to run everything smoothly. It is better to underspend and learn from your mistakes while having funds to adjust than overspending and not having any at all.

In terms of inventory, if you overorder, it will take a long time for your products to sell, and even worse, if you have a supplier that takes a long time fulfilling an order and shipping, your customer won’t be pleased. 

It's better to test a smaller amount of inventory to gauge your product's demand and adjust the order accordingly. With suppliers, it is best to order from a few and figure out which you like best.

6) Ignoring the Importance of Mobile UX

62% of smartphone users have purchased something on their mobile devices in the last six months. With figures like that, the emphasis on creating a responsive e-commerce store that works across all devices is vital. Thankfully, the tech to help get you there is relatively easy these days — there are no excuses for a poor mobile experience in 2023.

Get to know the nuts and bolts of what good mobile UX looks like for your store. Using Shopify's store builder means that you automatically get a store that’s optimized for mobile devices. 

In contrast, anyone working with a more custom system like Drupal may have to spend some extra development time to get things right. If you have gone with a shopping app, ensure it’s been robustly tested before the big launch.

Either way, it’s worth taking the time to test your store yourself on various devices, from laptops to tablets — with differing web speeds and from different locations and IP addresses around the world. 

If a customer finds your site difficult to navigate, it’s easy for them to go elsewhere. It’s up to you to make sure they don’t need to.

7) Having a Lackluster Marketing Strategy

It’s a sunny day, and you’ve made the perfect lemonade. It’s the ideal sparkling solution for a warm summer’s day. But you’re selling it on an empty street, and no one knows you’re there. 

That’s why you need to ramp up your online marketing strategy. Your plan should include paid, owned, and earned media and contain useful and relevant content.

Think about your audience. Who are they? What do they want from your brand? What social media platforms do they use? These questions are essential when formulating your marketing strategy.

Even the smallest startups will need to invest in paid media at some point. Social media ads are a great way of driving traffic to your online store and are relatively cheap compared with other forms of paid advertisements. 

Social ads are the cornerstone of a successful online business, with an estimated 1.39 billion active Facebook users every month.

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8) Not Optimizing for SEO 

Having SEO on your e-commerce site may seem like something you’d apply later, but it's best to utilize it straight from the start. You want to establish what are your most important keywords. 

At the bare minimum, you want to have them in your page title tags with relevant search terms that directly pertain to what you’re selling. It’s best to go for the highest volume, lowest competition keywords to give yourself the best chance of ranking in search.

If that seems a little advanced and you need more help, check out this article by Neil Patel on the ultimate guide to SEO for an e-commerce site. If you want professional help, I recommend hiring a consultant specializing in SEO on Upwork.

9) Not Planning and Testing Products

People think that all you have to do is pick any product, and because it's sold online, you will become a thriving e-commerce business owner. 

That would be great if this were a dream, but unfortunately, you have to realize you can not just bring a product into the marketplace and not test it first. You must do market research through software and competitor analysis to have a successful outcome.

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10) Working in Saturated Niches

You don’t want to get into a niche where everyone is trying to sell the same products and being too generic. Selling dog collars is not going to get you anywhere. But if your niche down into military dog collars, you might have a better chance.

But the overall sense is that when you go into a niche, don’t just pick a generic everyday product like dog collars and fitness watches that everyone online is trying to sell. You have to be able to go into a niche and niche further down if you hope to gain any success.

Besides, you don’t want to sell products that have widely known brand name competitors like Nike and Adidas. Selling gym apparel, sneakers, and other related products that are brand dominated in those niches would be out of the question.      

11) One and Done

Some individuals give up easily when faced with obstacles in their plans. This is common in the world of e-commerce as well. You may have done all the necessary research and competitor analysis, but when your chosen product doesn't sell as well as expected, you may be tempted to shut down your store and give up. 

However, it's important to remember that success in e-commerce is not always guaranteed, and there may be various reasons why your product isn't selling as well as you'd like. 

So, you’d want to at least minimum try out 3-5 products before calling it quits. You will learn from your previous failures, but if you quit after just one product, you will never know what could have been.

12) Focusing Too Much on The Front End

In any business, not just e-commerce, you want a good website, business cards, and a catchy brand name. But those elements will not keep your business running in the long term. You have to develop a robust backend as well because that is what will sustain your business.

Your customers are the ones who will keep your business alive so keep them in consideration when it comes to how they interact with your site and their experience from doing so. Your website needs to offer the functionality that makes it run more efficiently.

13) Poor Site Navigation

Just like the checkout process, you want to have your site easy on the eyes and easy to navigate. Some of the most critical navigation elements in e-commerce are labels (be straightforward) and visuals (they drive navigation more than text). Not having good site navigation will completely turn people off from what could have been potential customers. 

Your customer wants everything easy, convenient, and intuitive, from browsing the website to finding products and everything in between.

Take the company Norwegian Rain as an example. 

As seen above, you can automatically tell what the company is selling. There is no cluster on the site, such as annoying animations. The cart is easily identifiable in the top left-hand corner. 

You don’t even have to use a mobile phone to tell the site would be easily optimized for mobile devices. Most importantly, there is no doubt a first-time visitor would be able to navigate the site quickly and gain any information or product they desire.

That aligns with the checkout process, as previously stated. Make it easy for your potential customer and they’ll either purchase easily, find more information about your startup easily, or at the least know fast if they want to be associated with your company or entirely leave.

14) Annoying Pop-Ups

There is almost nothing more annoying to a potential consumer than going to a site to determine if they’re going to buy, and a pop-up appears only after a few seconds of them being on a website.

There is nothing wrong with having a popup on your site, but there is a time and a place for it. When you are just looking to see if you want to purchase from a site, an immediate popup may annoy your potential customer.

Having ones where the exit button seems to be nowhere in sight will ultimately turn them off, and they will leave your site more times than not.

If you are going to utilize a popup, it is best to have it appear after a few minutes from when a user is on your site. 

Even better is having it activate when a particular action is taken on your site, like when someone adds something to their cart. It’s also a good practice to include something enticing, like a coupon or a free add-on to what they are already looking to buy.

15) Required Registration 

What will annoy potential customers even more, is requiring them to register after only a few moments upon arriving at your site. Expecting anyone to have to register or not have access to your site will cause most to leave. You wouldn’t ask someone out only after meeting them for a few minutes, would you? Of course not, and it is the same as your site.

Suppose you want someone to commit to your site and even become a fan; they must get to know your company and products. That will determine whether or not they will not like your site and leave, make a one-time purchase, or become lifelong repeat customers.

16) Not Having Customer Service

No matter how big or small your company is, you will not go very far if you do not have customer service. You are selling a product online, and people will have questions, and if you can not provide an answer or have a team that can, they will move on to your competitors.

Ten to fifteen years ago, if you had terrible customer service, the most a person could do was write a letter of complaint, and you’d get a refund. 

Nowadays, with everyone having a computer in their pocket, all they would have to do is share their feelings online where the whole world can see it.

In the aspect survey of 2017, 54% of people said they stopped doing business with a company because of a bad experience, and that number is even higher with millennials, upwards of 61%.

Case Studies

Fab

Fab was one of the fastest-growing eCommerce stores in history and was worth over 1 billion before it crashed. What they got wrong was pivoting. A pivot generally means that a business is looking to find a fresh perspective and vision to prevent itself from growing stagnant.

A pivot allows a company to go in a new direction when its current strategy is not doing well. Pivoting is not bad, but it is essential to know when to do so.

Fab had pivoted before as they were a social network for gay people but wasn't seeing many users. So they moved on to having a store when they realized there was a market for users who wanted an easy and accessible way to purchase designer wear.

Their ultimate downfall was that they pivoted again to become the designer alternative to Amazon and Ikea. They were already a successful company but created another problem trying to move on to a new business. 

As a wise person once said, “if it isn't broke, don't fix it.” It’s normal for a struggling company to pivot. However, as Fab showed, they just pivoted just for the sake of it.

Tutorspree

Tutorspree was started in 2011 and was a platform for parents to find tutors for their children. Two years later, they had made $1.8 million in estimated revenue.

But that all halted when Google decided to change its SEO algorithm. Generally, for any business, that isn’t a huge deal as they can adjust and acquire customers other than just through SEO alone. 

The same, unfortunately, could not be said for Tutorspace. They made the mistake of only relying on one way to acquire customers, and just after years of business, they ceased to exist.

Entrepreneurs should invest half of their marketing into a high-risk strategy, and the other half in a proven, consistent approach, with a lower return on investment. Putting all your eggs in one basket will never plan out well. So learn from Tutorspace and divide your acquisition methods into different channels and not just one.

Toys R Us

Toys R Us was once the number one store in America for parents to buy toys for their children. But during the early stages of e-commerce, they decided to contract with Amazon and let them handle online orders. 

Later, Toys R Us got out of their contract, but it was apparent they just focused on the transitional stage of a customer's journey. At its core, direct customer engagement addresses customer preference throughout the customer’s journey; something Toys R Us ultimately failed to do. Leading them to be ironically out of business by the same company they fought so hard to get out of a contract in the first place. 

It makes no difference what size or performance your company has.If you ignore your customer and do not establish customer service, they will soon forget about you.

‍You can read more about what happened to Toys R Us here.

VO2 Sportswear

After realizing no triathlon clothing brand was properly catering to the market from a design point of view, Matthew decided to do it himself and started VO2 Sportwear. 

Through social media, sponsorships, and SEO, the business made £250k in its third year but failed to manage its cash flow and shut down.

The main reasons for failure were not diversifying enough, hiring too soon, and not understanding the effect of overtrading. If they had moved into one or two winter sports, they would have been able to sustain better revenues through the winter months.

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Wrapping Up

E-commerce business has a failure rate of about 80%-90% failure rate. Many mistakes are made when creating an e-commerce business, but as an entrepreneur, you must be aware of those faults to continue in business or watch the entire e-commerce firm fail. 

If there are more case studies, you’d like to learn from so you do not face the same results go to our Startup Cemetery. You’ll want to go to the category section and click the “e-commerce” type of business.

Frequently Asked Questions

How Many E-commerce Businesses Fail?

E-commerce business has a failure rate of about 80%-90% failure rate. Many mistakes occur when building an e-commerce business, so you must research before investing money into a new venture.

Why Do E-commerce Businesses Fail?

The most common causes of e-commerce business failures are poor product content, not having a clear return policy, poor money management, and not having a clear enough marketing strategy.